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8/13/2019 BFB 2012 Annual Report (1)
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2012 ANNUAL REPORT
8/13/2019 BFB 2012 Annual Report (1)
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201020092008
8%Underlying Change
Reported Change
14%Reported Change
-4%
4%Underlying Change
Reported Change
7%
6%Underlying Change
*Underlying Changerepresents the percentage increase or decrease in underlying operating income, a non-GAAP financialmeasure. Please refer to page 24 for a reconciliation of Underlying Change to Reported Change, which represents the percentage
increase or decrease in operating income, the most di rectly comparable financial measure in accordance with GAAP.
Measuring Our ProgressFiscal 2012 marked the return of high single-digit
growth in underlying*operating income.
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20122011
Reported Change
20%Reported Change
-8%
6%Underlying Change
9%Underlying Change
FISCAL 200812
OperatingIncome Growth
01Brown-Forman 2012 Annual Report
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Brown-Formancontinues to
thrive and endurethanks to thestrength of
our brands and
the quality of ourpeople who
help build themevery day.
03Brown-Forman 2012 Annual Report
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United States
42%
Europe
27%
Rest of World
31%
Right at Home Across the WorldWere successfully expanding our geographic
reach. In fact, our 12%underlying salesgrowth rate internationally was more than twice
that of growth in the U.S.
Net Salesby Geography
FISCAL 2012
LITTLE BLACK DRESSSPLASH
1 OZ. LITTLE BLACK DRESS CLASSIC VODKA
4 OZ. DIET CRANBERRY JUICE
In a shaker filled with ice, add ingredients, roll to mix and pour into
a martini glass. Garnish with a twist.
04
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Dear Shareholders,
Its my pleasure to share with you once again someof my perspectives on Brown-Forman and your
investment in it. As a general overview, I believe our
142 year-old company continues to thrive due to
the quality of our brands and the people who
help to build them each and every day in a global
spirits marketplace that offers such enormous
potential for growth.
Fiscal 2012: Our Growth Accelerates
In fiscal 2012, the companys underlying growth
rates in net sales and operating income were
both strong at 9%. These high single-digit growthrates represent an acceleration over last years
comparable topline growth of 4% and bottom
line growth of 6%. Additionally, they approximate
Brown-Formans long-term historical rates
of growth, which of course is quite encouraging.
COMPREHENSIVE PERFORMANCE The companys
growth story was led in fiscal 2012 by the Jack
Daniels trademark, one of the most valuable
distilled spirits brands in the world. The Jack
Daniels Black Label brand is one of the worlds
largest super-premium brands by both volume
and value. The combination of very large volume
derived from a broad and diverse set of global
markets, and super-premium prices, makes
Jack Daniels a very rare brand indeed. In fiscal
2012, our highly successful launch of Jack
Daniels Tennessee Honey in the U.S. extended
the trademarks reach to new consumers and
occasions, and helped propel our performance
in the largest global market for international
branded spirits.
During this past fiscal year, I continued
to be impressed by the comprehensiveness of
our performanceacross geography, portfolio,
and function. Using geography as the example
here, consider that every one of our 12 largestmarkets experienced net underlying sales growth
in fiscal 2012; our U.S. business grew market
share for the first time in several years; Europe
grew underlying sales at high single digits against
a very challenging backdrop; and slicing our
business yet another way, emerging markets grew
underlying sales by 17%, contributed about
45% of the incremental underlying net sales growth,
and now account for approximately 25% of the
companys business.
Beyond the geographic breadth of the
companys performance and in addition to theJack Daniels trademark, I was pleased with
Finlandias growth acceleration, as well as the
continued excellent progress of the super-premium
brands Woodford Reserve, Herradura, and
Sonoma-Cutrer. Southern Comfort showed signs
of improvement in the latter part of the year
and Im encouraged by our organizations
heightened level of focus and creativity in recent
months. While we are not where we want to be
just yet, I believe the brand may be starting to
turn the corner and we remain highly committed
to getting the brand growing again.
During this pastfiscal year, I continued
to be impressed bythe comprehensivenessof our performance
across geography,portfolio, and function.
A Toast to SuccessfromPaul Varga
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Innovation for Evolving TastesBetween pioneering with Southern Comfort and the
successful launch of Jack Daniels TennesseeHoney, Brown-Forman continues to be at the forefront
of avored brown spirits.
SouthernComfort
53%
Jack DanielsTennessee Honey
19%Market Sharein the U.S.
Flavored Brown Spirits*
*Source: Nielsen 12-month volumes ending April 28, 2012. Other includes Red Stag, Fireball, Wild Turkey American Honey,
and Evan Williams Honey and Cherry. All the foregoing are trademarks of their respective owners, no authorization needed.
OtherCompetitorsBrands
28%
SOUTHERN HURRICANE
1 OZ. SOUTHERN COMFORT/1 OZ. SWEET AND SOUR MIX /
1 OZ. ORANGE JUICE / 1 OZ. PINEAPPLE JUICE / SPLASH OF GRENADINE
Stir all ingredients and pour into a hurricane glass.
Garnish with an orange wedge and cherry.
FISCAL 2012
Brown-Forman
Market Share
72%
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STRATEGIC CONSIDERATIONS Fiscal 2012 was
equally impressive from a qualitative and strategic
standpoint as we continued to position the
company for success in the years ahead via both
operating and capital investments. These effortsand investments encompassed R&D, Production,
Packaging, Supply Chain, Information Technology,
Digital Communications, Design, and Talent
Development, to name just a few.
Studying the last ten years, for example, we
find it helpful to break the period into two
segments to illustrate a point. The first five years
of this period (from fiscal 200307), which
Ill refer to as the Good Times, were a periodof strong global expansion and excellent results
for many businesses. The second and more recent
five years (from fiscal 200812), which Ill refer
to loosely as the Bad Times, spanned both the
very difficult economic recession of 200809
and the steady recovery from 2010 to today.
RETURNS FOR SHAREHOLDERS Brown-Formans
TSR performed very well over the entire ten-year
period and in both of the five-year periods. In
addition to the quality and consistency of our
performance across the three measurement
periods, the companys TSR relative to the S&P500 is also noteworthy and emphasizes our
ability to perform well over a long-time horizon,
as well as our resiliency to grow the company in
both good and bad economic conditions.
We strive to produce these consistent and
excellent long-term returns for you, our
shareholders, by building strong and enduring
brands market by market, which have multi-generational growth prospects and yield attractive
returns on invested capital over the long run.
Weve found that these types of brands generate
cash very efficiently, and we put that cash to
excellent use by balancing well our reinvestment
behind the business with our desire to return
some of it to you to enhance long-term returns.
Again in fiscal 2012, Brown-Formans return
on invested capital (ROIC) of 19% was at the top
of our spirits competitive set, and this important
metric illuminates the capital efficiency of our
business, while reinforcing the organic nature
of our continuing growth. I believe our strong fiscal
2012 results, industry-leading ROIC, excellent
financial health, and continuing prospects for
growth were key contributors to Brown-Formans
fiscal 2012 total shareholder return (TSR) of
22%, which compared quite favorably to the 5%
TSR for the S&P 500 over the same period.
10 Years Ending Fiscal 2012: Performing
in Both Good Times and Bad Times
While we were pleased with our progress and
results of the last 12 months, I believe that
longer-term performance is even more important
for a company such as ours that strives to thrive
and endure without end. Using our companys
initials, we often refer to this as Building Forever.
Fiscal2012was equallyimpressive from a
qualitative and strategicstandpoint as we
continued to position thecompany for success
in the years ahead viaboth operating
and capital investments.15%
10%
5%
0%
10-Year10 YEARS ENDING
FISCAL 2012
13%
5%
Good Times5 YEARS ENDING
FISCAL 2007
13%
9%
Bad Times5 YEARS ENDING
FISCAL 2012
14%
1%
Performing in Both Good and Bad TimesAnnualized Total Shareholder Return
B-F Class B Shares
S&P 500 Index
07Brown-Forman 2012 Annual Report
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Allocating Cash for Long-Term ValueWe take a thoughtful approach to reinvestment
creating value by focusing on company growth anddriving signicant cash returns to shareholders.
Ten-Year Cash
Allocations
FISCAL 200312
Returned to
Shareholders
$3.1b
Reinvested
$1.5b
OLD FORESTERMINT JULEP
3 OZ. OLD FORESTER / 1 TSP. SUGAR / ICE / MINT SPRIGS
Mix sugar in just enough water to dissolve. Bruise three mint
sprigs and place in julep glass with the sugar mixture. Fill cup with
ice and add Old Forester. Cap off with more ice.
Available
Cash
$4.6b 98% Cash
from Operations
2% Increasein Net Debt
38% RegularDividends,
Special Dividends
and Capital
Distributions
29% ShareRepurchase
33%CapitalExpenditures,
Working Capital,
Acquisitions
net of divestitures
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Looking again at the last ten years, Brown-
Forman has generated $4.6 billion in cash over
the last decade, with virtually all of it
derived directly from the business operations
and only a tiny amount attributable to avery small increase in net debt. Over the period,
we reinvested 33% of the cash back into the
business via capital expenditures, working capital,
and brand acquisitions (which in this
exercise is a net number that has been reduced
by the cash we received for our divestitures over
the periodLenox, Hartmann, and the Hopland-
based wine business). Having satisfied the capital
needs and opportunities of the business (and
not discovering any additional acquisitions that fit
our criteria for long-term value creation), we
returned 38% of the cash to shareholders throughregular dividends, special dividends, and capital
distributions. We used the remaining 29% of the cash
to buy back Brown-Forman stock at an average
price of just under $40 per share. This balance of
cash deployment served both the business and
shareholders well over the last decade.
Looking Ahead
I believe our BF150 strategy is positioning
Brown-Forman to continue this track record of
excellent growth and returns. As part of that
strategy, we have high aspirations for both the JackDaniels trademark and the rest of our portfolio of
brands. Over time, weve learned a great deal about
the global whiskey business, primarily through our
experience with Jack Daniels, a brand that is global
in scale, premium in price, and has significant
potential for continued long-term growth.
BUILDING BRANDS Since we aspire to be one of
the leading companies in the very attractive global
whiskey category, we plan to apply our knowledge
to other brands. Just as weve been successful in
expanding the Jack Daniels trademark with
full-strength line extensions such as Gentleman
Jack and Tennessee Honey, and in successfully
developing and building the super-premium
Woodford Reserve bourbon brand, we intend to
expand our know-how to other whiskeys that
we acquire or create.
We are very bullish on the global whiskey
category and the increasing role that Jack Daniels
and American whiskeys are playing in it. Were
We believe they too continue to offer superb long-
term growth potential for our company.
In closing, let me thank and congratulate
our employees worldwide for their individual andcollective efforts on behalf of the company.
It is because of them that the company is able to
report such excellent results, while also being
positioned for continued success in the years ahead.
And I thank you, our shareholders, as well for
your support and encouragement as we continue
to Build Forever.
Paul C. Varga
Chairman and Chief Executive Officer
June 27, 2012
also enthusiastic about the valuable trademarks
we own that compete successfully at the premium
end of the vodka, tequila, and liqueur categories.
OurBF150strategy ispositioning Brown-Forman
to continue this trackrecord of excellent growth
and returns. As part of thatstrategy, we have high
aspirations forboth the Jack Danielstrademark and the rest ofour portfolio of brands.
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BrazilJack Daniels surpassed50k cases in Brazil.
United KingdomSurpassed 1.1m cases of JackDaniels Tennessee Whiskey.
United StatesSouthern Comfort selected a new agencyof record for global marketing communicationservices across all traditional, digital and
emerging media channels.MexicoNew Mix is the biggest
RTD in Mexico.
CanadaCollingwood, the rst toastedmaplewood-mellowed
Canadian whisky, expandedinto Canada in scal 2012.
Global HealthofOur BrandsDiversity and performance
of our brands are the keys to
the health, prosperity and
longevity of our company.
Today, we are reaching newcustomers across the world
with new innovative products
and strategies, while
strengthening existing brands,
markets and positions.
GermanyWinter Jack sold 40k casesin the holiday season.
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South Africa
SoCo Lime
was introduced inscal 2012.
Australia
Brown-Forman was recognized as
the leading spirits supplier byThe Liquor Merchants Associationof Australia.
Poland
Finlandia 101
and FinlandiaSpices launchedin scal 2012.
Asia Pacic
Emerging markets continue
to be an important futuregrowth opportunity.
RussiaFinlandia brand is the#1 premium imported
vodka in Russia.
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I always enjoy writing to our shareholders. This is the fifth time I have done so,
and I am pleased to report, yet again, that our company continues to thrive.
Notably, this year marks a number of other five-year milestonesfor the companys
leadership, the Boards evolution, and the engagement of the long-term Brown
family shareholder base. Reflecting on them underscores how well constructed
Brown-Forman is for long-term growth and endurance.
excellent performance and Pauls tenure
are coincidental.
When Paul took over his role from Owsley
Brown II, we had the uncommon circumstance
of having a talented and youthful CEO with a
strategic mindset and business acumen honed
through 20 years of experience in our industry
and success in a progression of key jobs at
Brown-Forman. This combination of strengths
could not have been better timed for the
business, given the challenges that lay ahead.
Like others, our company needed stable and
dynamic leadership during this time of globaluncertainty. In Paul, we found both.
Pauls appointment was part of a well
designed succession planning process, put in
place by Owsley and our Board. In Owsleys
untimely passing this past year, we lost a great
leader, and a leading member of the fourth
As Paul described, fiscal 2012 marked the fifth
year of one of the most difficult periods in
our companys history. As a result, these last five
years offer a much better strategic perspective
on the health of the company than any single
year during that period or the period before.
And the news is excellent.There has been growth
in all describable markets: the United States,
developed international markets, and emerging
markets. From a total shareholder return perspective,
Brown-Forman has not only outperformed the
markets, it also surpassed its prior five-year growth
record, when times were good. From a leadership perspective, fiscal 2012
also marks the fifth year in which Paul Varga has
been the Chairman and CEO of the corporation.
Paul is always quick to credit the team of leaders
he has assembled around him, as well as our
talented employees around the world. Those of us
who know them share his appreciation for
their individual and collective contributions and
teamwork. Nevertheless, I dont think our
A Few WordsfromGarvin Brown
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generation that took this company from its
roots in Kentucky to the world stage. He shaped
our long-term strategies for growth, was a great
champion for global diversification and for
responsibly building brands that would endure for
generations. He believed in the creative power
of people and in giving back to the community.
For Pauls (and my) generation at Brown-Forman,
Owsley was not only family and/or a friend, but
an inspiration and a mentor. Of course, we miss
him. But I know that Brown-Formans on-going
success is our greatest testimony to his, and his
generations, lifes work. If he were here, Owsleywould try to suppress a proud smile, and join me
in thanking Paul, and the rest of his team, for
all of their leadership through these past years.
I think Owsley would also be pleased with
the evolution of our governance and team building
on the Board. In recent years, we have said
good-bye to a number of retiring, long-serving
directors. This year we are bidding a fond farewell
to Dick Mayer, one of the key directors who
worked with Owsley over the years, having joined
the Board in 1994. Dick has, at one time or
another, led and chaired our Audit, Governance
and Nominating, and Compensation committees,
and helped pave the way for the next generation
of directors.
On that front, I am particularly pleased with
the success we have had in recruiting new
independent directors over the last five years.
They have each brought unique talents and diverse
experience to the Boards deliberations. As a
case in point, last November, we were delighted
to welcome our newest independent director,Joan Amble. Joan, who recently retired as EVP
of Finance at American Express, is an accomplished
executive with extensive business experience
and financial expertise. She is a wonderful addition
to our Board.
Board of Directors
(In alphabetical order) Joan C. LordiAmble (2), Former Executive Vice President,American Express Company / PatrickBousquet-Chavanne (3,4), Co-Chairman,President and Chief Executive Officer,Yoostar Entertainment Group / Geo. Garvin
Brown IV(1,4,*,#)
, Chairman of the Board andExecutive Vice President, Brown-FormanCorporation / Martin S. Brown, Jr. (*,#),Partner, Adams and Reese LLP / Bruce L.Byrnes (2,4), Former Vice Chairman of theBoard, The Procter & Gamble Company /John D. Cook (2,3,4), Director Emeritus,McKinsey & Company / Sandra A.Frazier (*,#), Partner, Tandem Public RelationsLLC / Richard P. Mayer (3,4,5), FormerChairman and Chief Executive Officer, KraftGeneral Foods North America (now KraftFoods Inc.) / William E. Mitchell (2,3),Managing Partner, Sequel CapitalManagement, LLC; former Chairman,President and Chief Executive Officer, ArrowElectronics, Inc. / Dace Brown Stubbs(#),Private Investor / Paul C. Varga (1,*), Chairmanand Chief Executive Officer, Brown-FormanCorporation / James S. Welch, Jr.(1),Vice Chairman, Brown-Forman Corporation
(1)Member of Executive Committee of the
Board of Directors (2)Member of Audit
Committee (3)Member of Compensation
Committee (4)Member of Corporate
Governance and Nominating Committee (5)
Retirement effective July 26, 2012 (*)Member
of Brown-Forman/Brown Family Shareholders
Committee (#)Member of Brown Family
(From left) Sandra A. Frazier, James S. Welch, Jr., Martin S. Brown, Jr., Richard P. Mayer, Dace Brown Stubbs,
Paul C. Varga, Geo. Garvin Brown IV, Bruce L. Byrnes, Joan C. Lordi Amble, John D. Cook, and Patrick
Bousquet-Chavanne (William E. Mitchell not shown)
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portfolio, a resilient industry, and steadfast,
visionary leadership, all supported by an
uncommonly strong governance system of engaged
long-term shareholders and a dynamic Board.
Brown-Forman has all of these things. Its a powerful
formula for competing successfully in the global
marketplace, and bodes well for achieving our long-
term ambitions in this generation, and the
generations to come.
With sincere thanks for all your support,
Geo. Garvin Brown IV
Chairman of the Board
June 27, 2012
Finally, I know Owsley would have been pleased
with the work of the Brown-Forman / Brown
Family Shareholders Committee (Family Committee),
which Paul and I co-chair. This year is its fifth
anniversary. The groups ambition is to build and
nurture strong, enduring company-family relations
and has focused its efforts on strengthening
existing bonds and expanding opportunities for family
members to learn about and become engaged
in the company. One notable area of progress this
past year is the development of a curriculum
framework for educating and engaging family
members across a range of topics including thecompany and industry, effective governance,
ownership excellence, and the family itself, including
its involvement and interests in the communities
around the world where we live and work.
Heading into uncertain times, most companies
would agree on a similar wish list for success,
such as: a leading global brand, a growing brand
Family Committee members hold their March 2012 meeting at our companys Louisville, Kentucky headquarters.
(From left)Paul Varga (Co-Chair), Garvin Brown (Co-Chair), Ernie Patterson (Secretary), Augusta Brown Holland, Mac Brown, Sandra Frazier,
Martin Brown, Jr., Austin Musselman, Jr., Phil Lichtenfels, Bonnie Cress (Recording Secretary), and Lee Tatum
Other Family Committee members not pictured: Campbell Brown, Stuart Brown, Laura Frazier, Laura Lee Gastis, and Dace Maki
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Brown-Forman issteeped in a rich
heritage of buildingsuccessful brands.
Its our business. Its our passion. Andover the course of 140-plus years, these brands
have earned a special place in the livesof consumers. Today we are innovating across
brands and geographies to find new waysto extend and strengthen brand loyalty
from whiskeys, bourbons, vodkas and tequilasto liqueurs, sparkling wines, table wines,
and ready-to-drink products.
Portfolio of Brands
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Ready-to-Drink (RTD)
As RTDs continue to grow as a
category, Jack Daniels RTDs
surpassed 600k cases in Germany,
and depleted nearly 550k cases
in Mexico.
Gentleman Jack
Gentleman Jack set a new
depletion record, reaching nearly
400k cases worldwide.
Jack Daniels Tennessee Honey
Tennessee Honey exceeded
expectations with depletions
in excess of 450k cases in
North America.
Jack Daniels Single Barrel
Single Barrel set a new depletion
record at 130k cases worldwide.
Jack Daniels Family of Brands
*Depletions are shipments
direct to retail or from
distributors to wholesale
and retail customers, and
are commonly regarded
in the industry as an
approximate measure of
consumer demand.
Record Depletions
60Jack Daniels set depletionrecords in 60 countries.
Growth Rate
+32%Jack Daniels increased
its presence in developingeconomies, growing by
32% in Latin America alone.
Depletions*
500kJack Daniels surpassed
500k cases in bothGermany and France.
Accolades
#1Jack Daniels earned BestLiquor Brand and BestPremium Spirit Brand in
the annual AustralianLiquor Industry Awards.
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Southern Comfort Fiery Pepper
Fiery Pepper launched in the U.S.
providing an additional 28k cases
for the SoCo Family of Brands.
Growth Rate
+24%Depletions for SoCoLime grew 24% to 68k
cases due primarilyto strong performancein South Africa and
introduction in the U.K.and Germany.
Accolades
#2Southern Comfort is
the #2 Flavored Spiritin South Africa.
Depletions
100kSoCo Flavors depleted100k cases globally in scal2012, a 77% increase.
Liqueur
Chambord
Chambord was the ofcial sponsor
of the Victorias Secret Fashion
Show in scal 2012.
Tuaca
Tuaca launched its rst geo-targeted
digital and social media campaign in
scal 2012 which increased
Facebook fans by 300% and garnered
more than 1.8 million video views.
Ready-to-Drink (RTD)
Southern Comfort RTDs improved
9% driven by launch of SoCo
Lime & Soda in Australia and SoCo
& Cola in the United Kingdom.
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Ready-to-Drink(RTD)
Finlandia Frost RTD sold over 140k
cases in Mexico in its rst full year.
Little Black Dress(LBD)
Launched in the U.S. market
its rst entry into the mainstream
vodka market in the United States.
LBD Vodka depleted 18k cases in
its rst 3 months of launch.
Finlandia Flavored
Finlandia Spices was introduced
in Poland, entering a 2.3m herbal/
bitter avored vodka market.
Vodka
Accolades
#2Finlandia is the #2
premium vodka brandin all of Europe.
Portfolio Growth
+10%The total Brown-Formanvodka portfolio grew
10% in volume this year.
Accolades
#
1Finlandia is the #1 importedspirits brand in Poland,and the #1 imported vodka
in Russia.
Depletions
100kRussia grew Finlandia
61% in volume,adding over 100k cases
in that market alone.
Maximus
Maximus was acquired in scal
2012 primarily to enter the
large mainstream vodka segment
in Poland.
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Old Forester
Old Forester introduced both new
packaging and a new marketing
campaign in scal 2012.
Woodford Reserve Double Oaked
An innovative approach to twice-
barreled bourbon, Woodford Double
Oaked is the rst permanent line
extension by Woodford Reserve,
launched in scal 2012.
Canadian Mist
Canadian Mist, a 1.6 million case
brand, the third largest Canadian
whisky brand in the U.S.
Whiskey
Early Times
Early Times enjoyed over 4m media
impressions as the ofcial
Mint Julep of the Kentucky Derby.
Growth in the U.S.
+19%Woodford Reserve grew
19% in volume this year.
Depletions
200kWoodford Reserve
Family depleted globally200k cases.
+100kWoodford Reservesurpassed 100k fans
on Facebook.
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el Jimador
The biggest single tequila brand
in Mexico, el Jimador grew
its Facebook fan base from 8k
to 160k fans.
Antiguo
Antiguo experienced a healthy 16%
growth rate in Latin America last
yearthe highest of all our tequilas.
Tequila
Ready-to-Drink(RTD)
New Mix is the biggest RTD
in Mexico and grew depletions
10% in scal 2012.
Pepe Lopez
Pepe Lopez is the fun, affordable
tequila that makes a great tasting,
full avored house margarita.
Market Performance
+8%el Jimador grew depletions
8% in a very competitiveU.S. market.
Depletions
5.3mNew Mix Mexico grew
depletions 10% in Mexico,reaching 5.3m cases.
Growth Rate
+13%Globally, Herraduraincreased depletions by
13% to reach 290k cases,with nearly 100k in theU.S. alone, driven by
mixology programs andnew packaging.
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Russian River Ranches
For the 21st time in 23 years,
Russian River was crowned
Americas Most Popular Chardonnay
in Wine & SpiritsMagazines
annual poll of premium restaurants.
Korbel Sweet Ros
Sweet Ros increased depletions in
scal 2012 +21% over scal 2011.
Korbel Sweet Cuve
Sweet Cuve increased depletions in
scal 2012 +54% over scal 2011.
Champagne & Wine
Sonoma-Cutrer Les Pierres
Les Pierres is born of a single
vineyard with extremely rocky soil,
soil that infuses the grapes
with a varied mineral essence and
incredible complexity.
Depletions
350kSonoma-Cutrers brandssurpassed 350k cases,
growing depletions by 12%.Growth Rate
+25%Sonoma-Cutrers label,Sonoma Coast, is amongthe leading brands
of super-premium wineswith growth of 25%.*
*Source: Nielsen 4/28/12
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Selected Financial Data
Dollars in millions, except per share amounts
Year Ended April 30, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Continuing Operations:
Net sales 1,795 1,992 2,195 2,412 2,806 3,282 3,192 3,226 3,404 3,614
Gross profit 900 1,024 1,156 1,308 1,481 1,695 1,577 1,611 1,724 1,795
Operating income 341 383 445 563 602 685 661 710 855 788
Income from continuing operations 222 243 339 395 400 440 435 449 572 513
Weighted average shares
used to calculate earnings
per share
-Basic 168.4 151.7 152.2 152.6 153.6 153.1 150.5 147.8 145.6 143.0
-Diluted 168.9 152.5 153.1 154.3 155.2 154.4 151.4 148.6 146.5 144.1
Earnings per share from
continuing operations
-Basic 1.32 1.60 2.23 2.59 2.60 2.87 2.88 3.03 3.92 3.59
-Diluted 1.32 1.59 2.22 2.56 2.58 2.84 2.87 3.02 3.90 3.56
Gross margin 50.1% 51.4% 52.7% 54.2% 52.8% 51.6% 49.4% 50.0% 50.7% 49.7%
Operating margin 19.0% 19.2% 20.3% 23.3% 21.5% 20.9% 20.7% 22.0% 25.1% 21.8%
Effective tax rate 33.6% 33.1% 32.6% 29.3% 31.7% 31.7% 31.1% 34.1% 31.0% 32.5%
Average invested capital 1,266 1,392 1,535 1,863 2,431 2,747 2,893 2,825 2,711 2,803
Return on average
invested capital 18.0% 18.5% 23.0% 21.9% 17.4% 17.2% 15.9% 16.6% 21.8% 19.1%
Total Company:
Cash dividends declared
per common share 0.58 0.64 0.73 0.84 0.93 1.03 1.12 1.18 2.24 1.34
Average stockholders equity 1,290 936 1,198 1,397 1,700 1,668 1,793 1,870 1,904 2,046
Total assets at April 30 2,264 2,376 2,649 2,728 3,551 3,405 3,475 3,383 3,712 3,477Long-term debt at April 30 629 630 351 351 422 417 509 508 504 503
Total debt at April 30 829 679 630 576 1,177 1,006 999 699 759 510
Cash flow from operations 243 304 396 343 355 534 491 545 527 516
Return on average
stockholders equity 18.7% 27.1% 25.7% 22.9% 22.9% 26.4% 24.2% 24.0% 30.0% 25.1%
Total debt to total capital 49.4% 38.3% 32.5% 26.9% 42.8% 36.8% 35.5% 26.9% 26.9% 19.8%
Dividend payout ratio 41.1% 38.2% 36.1% 40.0% 36.8% 35.8% 38.9% 38.7% 57.0% 37.4%
Notes:
1. Includes the consolidated results of Finlandia Vodka Worldwide, Tuoni e Canepa, Swift & Moore, Chambord, and Casa Herradura since their acquisitions inDecember 2002, February 2003, February 2006, May 2006, and January 2007, respectively.
2. Weighted average shares, earnings per share, and cash dividends declared per common share have been adjusted for a 2-
for-
1 common stock split inJanuary 2004 and a 5-for-4 common stock split in October 2008.
3. Cash Dividends declared per common share in Fiscal 2011 includes a special dividend of $1.00 per share.
4. We define return on average invested capital as the sum of net income (excluding extraordinary items) and after-tax interest expense, divided by averageinvested capital. Invested capital equals assets less liabilities, excluding interest-bearing debt.
5. We define return on average stockholders equity as net income applicable to common stock divided by average stockholders equity.
6. We define total debt to total capital as total debt divided by the sum of total debt and stockholders equity.
7. We define dividend payout ratio as cash dividends divided by net income.
22
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Brown-Forman 15-Year Relative Stock Performance versus the S&P 500as of April 30, 2012 B-F Class B Shares
S&P 500 Index
Compound Annual Growth Rateas of April 30, 2012
9%
6%
3%
0%
12%
Highlights
200
0
0%
6%
12%
400
600
1997 2000 2003 2006 2009 2012
2003
18.0%
181
108
152
114
295
164
100
100
230
109
428
175
2004
18.5%
2007
17.4%
2010
16.6%
2005
23.0%
2008
17.2%
2006
21.9%
2009
15.9%
18%
24%
Return on Average Invested Capitalas of April 30
2012
19.1%
2011
21.8%
Net Sales
Operating Income
Diluted EPS
35-Year
7%
11%
8%
25-Year
5%
11%
7%
15-Year
7%
10%
8%
10-Year
8%
11%
9%
5-Year
5%
7%
6%
23Brown-Forman 2012 Annual Report
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Lee D. TatumVice President,Chief of Staff
Paul C. VargaChairman andChief Executive Officer
James S. Welch, Jr.Vice Chairman
Donald C. BergExecutive Vice President,Chief Financial Officer
Geo. Garvin Brown IVChairman of the Board andExecutive Vice President
Matthew E. HamelExecutive Vice President,General Counsel andSecretary
Jill A. JonesExecutive Vice President,Chief Production Officer
Michael J. KeyesSenior Vice President andPresident, North AmericaRegion
Philip A. LichtenfelsSenior Vice President,Chief of Staff
Mark I. McCallumExecutive Vice President,Chief Operating Officer
Jane C. MorreauSenior Vice President,Director, Finance, Accountingand Technology
Kris SirchioExecutive Vice President,Chief Marketing Officer
Lisa P. SteinerSenior Vice President,Chief HumanResources Officer
Brown-Forman Executive Leadership
The senior executives pictured here have extensive global experience in a variety of industries and,
combined, over 190 years of varied, cross-functional service with Brown-Forman.
Non-GAAP Financial Measures
The following is provided to supplement certain non-GAAP
financial measures in this report (page 01), both as reported
(on a GAAP basis) and including or excluding the impact of
certain items (non-GAAP). Brown-Forman believes these non-GAAP
financial measures provide useful supplemental information to
investors regarding our business trends and performance of our
on going operations and are useful for period-over-periodcomparisons of such operations.
Acquisitions/Divestitures Refers to net impact of acquisitions/divesti-
tures, including the operating results, as well as the gain on sale. We believe
that excluding the gain on the sale and operating results from current period
versus the same prior period provides helpful information in forecasting and
planning the growth expectations of the Company. Foreign currencies
Refers to net gains and losses incurred by the Company relating to sales and
purchases in currencies other than the U.S. Dollar. Brown-Forman uses the
measure to understand the growth of the business on a constant dollar basis
as fluctuations in exchange rates can distort the underlying growth of the
business (both positively and negatively). To neutralize the effect of foreign
exchange fluctuations, the Company has translated current year results at
prior year rates. While Brown-Forman recognizes that foreign exchange volatil-
ity is a reality for a global company, it routinely reviews its performance on a
constant dollar basis. The Company believes this allows both management
and investors to understand better Brown-Formans growth trends. Estimated
net change in distributor inventories Refers to the estimated financial
impact of changes in distributor inventories for the Companys brands. Brown-
Forman computes this effect using estimated depletion trends and separately
identifying trade inventory changes in the variance analysis for key measures.
Based on the estimated depletions and the fluctuations in distributor inventory
levels, the Company then adjusts the percentage variances from prior to
current periods for our key measures. Brown-Forman believes it is important
to make this adjustment in order for management and investors to understand
the results of the business without distortions that can arise from varying
levels of distributor inventories. Non-cash agave charge Refers to an
abnormal number of agave plants identified as dead or dying. Although agricul-
tural uncertainties are inherent in our tequila or any other business that
includes the growth and harvesting of raw materials, we believe that the mag-
nitude of this item distorts the underlying trends of our business. Therefore,
we believe that excluding this non-cash charge allows for a better understand-
ing of growth trends. Impairment charge Refers to a non-cash charge
related to a trademark impairment of Don Eduardo, a low-volume, high-priced
tequila brand. Brown-Forman believes excluding this non-cash charge allows
for a better understanding of growth trends. Reduction in workforce
Refers to the charges associated with an 8% reduction in the global
workforce, including an early retirement program. We believe that excluding
these costs provides investors a better understanding of the continuing
cost base of the company.
% Change vs. Prior 12 Months Ended April 30, 2008 2009 2010 2011 2012
Underlying operating income growth 8% 4% 6% 6% 9%
Other, net - (1%) - 1% (1%)
Estimated net change in trade inventories - (2%) 2% 1% (1%)
Impact of foreign currencies 5% (4%) (1%) 3% (3%)
Acquisitions/Divestitures 1% 4% (4%) 7% (12%)
Non-cash agave charge - (3%) 4% - -
Impairment charge - - (2%) 2% -
Reduction in workforce - (2%) 2% - -
Reported operating income change 14% (4%) 7% 20% (8%)
24
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Corporate Information
CORPORATE HEADQUARTERS
850 Dixie Highway / Louisville, Kentucky 40210 / (502) 585-1100
www.brown-forman.com / brown-forman@b-f.com
LISTED
New York Stock Exchange BFA/BFB
STOCKHOLDERS
As of April 30, 2012, there were 2,923 holders of record of Class A
Common Stock and 5,812 holders of record of Class B Common Stock.
Stockholders reside in all 50 states and in 26 foreign countries.
REGISTRAR, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
Computershare
web.queries@computershare.com
(800) 622-6757 (U.S., Canada, Puerto Rico)
(781) 575-4735 (International)
P. O. Box 43078 / Providence, Rhode Island 02940-3078
Or Overnight Courier250 Royall Street, Canton, Massachusetts 02021
EMPLOYEES
As of April 30, 2012, Brown-Forman employed about 4,000 people,
including approximately 200 on a part-time or temporary basis.
Brown-Forman Corporation is committed to equality of opportunity
in all aspects of employment. Brown-Forman Corporation provides full
and equal employment opportunities to all employees and potential
employees without regard to race, color, religion, national or ethnic
origin, veteran status, age, gender, gender identity or expression,
sexual orientation, genetic information, physical or mental disability or
any other legally protected status. This nondiscrimination policy
applies to all terms, conditions and privileges of employment, such as
those pertaining to selection, training, transfer, promotion, compensation,
and educational assistance programs. It is also the policy ofBrown-Forman to prohibit all forms of sexual and other harassment.
FORM 10-K
Our 2012 Form 10-K is included with this 2012 Annual Report in its
entirety with the exception of certain exhibits. Interested stockholders
may obtain without charge a copy of our Form 10-K, or a copy of
any exhibit, upon written request to: Stockholder Services, Brown-Forman
Corporation, 850 Dixie Highway, Louisville, Kentucky 40210.
The Form 10-K can also be downloaded from the Companys website at
www.brown-forman.com. Click on the Investor Relations section of
the website and then on Financial Reports and Filings to view the Form
10-K, as well as other important documents.
FORWARD-LOOKING STATEMENTS
This 2012 Annual Report contains forward-looking statements as
defined under U.S. federal securities laws. By their nature, forward-looking
statements involve risks, uncertainties and other factors (many beyond
our control) that could cause our actual results to differ materially from
our historical experience or from our current expectations or projections.
Except as required by law, we do not intend to update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. For a description of these risks and uncertainties
please see Item 1A Risk Factors and Item 7 Managements Discussion
and Analysis of Financial Condition and Results of Operations of the
Form 10-K included with this 2012 Annual Report.
CERTIFICATIONS
The CEO and CFO Certifications required to be filed with the SEC
pursuant to Section 302 of the Sarbanes-Oxley Act are set forth in
our Form 10-K, which is included with this Annual Report.
COUNSEL
Stoll Keenon Ogden PLLC, Louisville, Kentucky
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
STOCK PERFORMANCE GRAPH
This graph compares the cumulative total shareholder return of our
Class B Common Stock against the Standard & Poors 500 Stock
Index, the Dow Jones U.S. Consumer Goods Index, and the Dow Jones
U.S. Food & Beverage Index. The graph assumes $100 was invested
on April 30, 2007, and that all dividends were reinvested. The cumulative
returns shown on the graph represent the value that these investments
would have had on April 30 in the years since 2007.
FISCAL 2012 VIDEO
To see and hear Brown-Forman CEO Paul Varga and Board Chairman
Garvin Brown discuss highlights of the companys fiscal 2012
performance, please go to brown-forman.com and look for the link
to the video clip.
ENVIRONMENTAL STEWARDSHIP
As a responsible corporate citizen, Brown-Forman is committed to
environmental stewardship and sustainability. Our environmental efforts
focus primarily on the efficient use of natural resources, conservingenergy and water, and minimizing waste. This annual report is printed
on FSC-certified paper.
Indexed Total Shareholder Returnas of April 30, 2012, dividends reinvested
2007 2008 2009 2010 2011 2012
BF Class B Shares Dow Jones U.S. Consumer Goods
Dow Jones U.S. Food & BeverageS&P 500 Index
$100$100
$100$100
$108$ 95
$ 98$105
$ 95$ 62
$ 74$ 82
$121$ 86
$102$106
$155$100
$123$129
$189$105
$135$140
DesignandIllustration:VSAPartners,C
hicago,
IL
Photography:PaulElledge,
Chicago,
IL,andThomasHartShelby
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Your friends at Brown-Forman encourageyou to please drink responsibly.
An important part of our work on alcohol responsibilityis reflected on Our Thinking About Drinking: The Issues
Forum, where we share our perspective and positions on
alcohol topics and invite your comments, opinions or ideas.
www.ourthinkingaboutdrinking.com
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